Finance: Loan Guarantee Scheme

Lord Barnett Excerpts

Tuesday 24th July 2012 Lords Chamber

Asked by

[Lord Barnett]

To ask Her Majesty’s Government how the loan guarantee scheme, announced in a Written Statement by Lord Sassoon on 18 July, will work.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, under UK guarantees the Government aim to kick-start major infrastructure projects that may be struggling to access private finance. Eligible projects will be subject to a detailed assessment process and the Government will conduct and consider the most effective form of guarantee based on the specific project risks. The Government have wide discretion over how a guarantee is structured, subject to the terms and dynamics of each individual project. The guarantees could cover key project risks such as construction, performance or revenue risk.

[Lord Barnett]

I thank the Minister, although his Reply might have been better as an Oral Statement. I welcome the infrastructure plan. However, with the Prime Minister talking about a 10-year austerity programme and with growth likely to indicate tomorrow that we are in a triple-dip recession, is that not one of the reasons why even companies with 100% guarantees will not want to borrow money? That applies to the main scheme and even the PPP. No one should be surprised. The Prime Minister originally said that the plan would come into force in 2014 at the earliest but, given the economic background, do we not need it now, not in 2014? In those circumstances, could he suggest to the Chancellor that he consider a quadruple U-turn and find a little cash to help kick-start the infrastructure plans, which are so welcome?

[Lord Sassoon]

My Lords, I am very happy to correct the noble Lord, Lord Barnett. Some £40 billion of projects in the national infrastructure plan that are due to start construction before 2015 could well be eligible for guarantees under the scheme. We are inviting applications for guarantees now and, subject to legislation, we hope to have the first guarantees granted this autumn, so this is absolutely not something that waits till 2014. It is because of the strength of the national balance sheet and the fiscal retrenchment that we are able to come forward with a £40 billion scheme that starts this autumn.